Let’s strengthen Social Security. ... Allow younger workers to decide for themselves if they want to take a portion of their payroll taxes and put it in a personal account.

Social Security Reform:
An Interview with Leanne Abdnor of For Our Grandchildren

The Center’s Corporate Counsel, Renee Giachino, recently interviewed a member of President Bush’s Commission to Strengthen Social Security on the radio show “Your Turn — Meeting Nonsense with Common Sense,” that airs on 1330 AM WEBY, Northwest Florida’s Talk Radio.  Leanne Abdnor is President of For Our Grandchildren and founder of Alliance for Worker Retirement Security.  She recently traveled with President Bush to Florida to promote the President’s Social Security plan.

What follows are excerpts from the interview.

GIACHINO:  I am very pleased to introduce my next guest.  She is the President of For Our Grandchildren, and she is a member of the President’s Commission to Strengthen Social Security.  She is the founder of the Alliance of Worker Retirement Security and is a nationally known expert in the field of Social Security reform.  Let me introduce Leanne Abdnor.  Are you there?

ABDNOR:  You bet.

GIACHINO:  Thank you for joining us.  Your timing could not be more perfect following the CNN news discussion on Social Security reform.  It is as if I hired CNN to set up this interview.

Can you please tell us more about For Our Grandchildren.  What is the mission of the organization?

ABDNOR:  Sure.  For Our Grandchildren is a non-profit, bi-partisan organization whose mission is to go around the country and educate people about the problems ahead in Social Security, the options that are out there, and we have a bias because we are in favor of voluntary personal accounts for younger workers.  We have been doing this for the last 2-1/2 years, and we have great fun and it has been very successful.

GIACHINO:  Let me back up just a little.  We all pay our taxes — or at least most of us do — and some of it is voluntary and some is not so voluntary.  In some cases, your employer goes ahead and deducts it for you.  Let’s start with the basics: what is Social Security in a nutshell?

ABDNOR:  Social Security began in 1935, back at a time when we were still feeling the effects of the Depression.  Our country was not the first to adopt this sort of a program.  The first was in Prussia in the 1800s, and others adopted it before we did.  It was set up in a way in which it was called “pay as you go.”  This means that taxes that are paid into Washington by today’s workers immediately go out the door to pay the benefits of today’s retirees.  It is actually an inter-generational transfer.  No money is saved.  In fact, the government is not allowed to save money like a bank.

So nothing is saved, and it is very much dependent upon the number of workers per retiree.  Years ago, there were 16 workers paying for one retiree.  Right now it is a little over three workers paying for one retiree and we are going to two-to-one, and that is the demographic problem that is facing us.

GIACHINO:  So is that what is wrong and why there is an urgent need for a change?

ABDNOR:  I think there is an urgent need because the longer we wait the more expensive it is.  The other problem inherent in this now is because taxes have gone up — payroll taxes have gone up so much in the last few decades, younger workers are not likely to get back as much money as they have put in.  So it is not a very good deal for them.  If we ask them to increase their taxes to pay for the shortfall that is coming anyway, it is even worse.  So we think it is time that we not do what we have done for decades, which is raise taxes over and over again, but instead step back and look at what kind of program this is and whether it is meeting the needs of the people it is suppose to and should we not introduce this element of private investment to go along with Social Security benefits.

GIACHINO:  Social Security has always been a hot issue here in Florida because the seniors’ vote is critical.  Why should senior citizens here in Florida get behind the President’s Social Security plan?

ABDNOR:  The first reason is that the President and all of us who have been involved in this reform movement for some time have said emphatically that if you are 55 years or older absolutely nothing is going to change to your benefits.  Not a penny.  You are going to get the promised benefit plus the inflation adjusters each year.  And once our seniors understand that, then they are not so frightened about the idea of change when they are able to take a look at their children and grandchildren and ask what is best for them — is this the kind of program we want to continue for them, or should we make some changes?  And it is because I think elders are able to understand that — that this really is not about their benefit but rather about their kids and grandkids — that they are much more open to listen to change coming down the road.

GIACHINO:  Hence the name of your organization, For Our Grandchildren.  Let me make sure I have this right.  Folks who are 55 years or older — those approaching retirement and those already receiving Social Security — should not be afraid to support this.  Their fear is not real that they would lose their benefits.  Is that right?

ABDNOR:  That is absolutely correct.  And when you think about it politically, no politician in this country is going to change the benefits on somebody already retired or near-retired.  That is just politically not going to happen and it is unfair.  People need time to adjust to change, and those who are 55 years or older would not have that time. 

So it is really critical that we take a look at this.  We do a couple of things.  This is what we are recommending.  First, 55 years and older would have to be guaranteed their benefits.  Second, we believe — and this is something that came out of the President’s Commission that I was on — that we need to raise the minimum Social Security benefit.  And the reason for that, Renee, is that we found that you can work 30 years in this country at a low-wage job and retire with a benefit from Social Security in which you are still below the poverty line.  And we thought that was terrible for an anti-poverty program.  There are hundreds of thousands of elders in the program now in exactly that situation.  They worked at least 30 years and contributed to Social Security, and their benefits are below the poverty line.

So the first thing we would recommend is to strengthen the security net.  Let’s strengthen Social Security.  It is so important, especially to women.  And then the third thing is to allow younger workers to decide for themselves if they want to take a portion of their payroll taxes and put it in a personal account, or do they want it all to continue to go to Social Security.  If they choose the personal account, the way it would work is that for every dollar a worker puts into his or her account, they would get a dollar less from Social Security.  That is only fair.  But the idea then is that you would actually have something that you owned that was actually your money that was in an account, and it is likely to return more money to you than it would have if you left your money in Social Security.  You have it and own it, and if you happen to die early before retirement you would have something to pass on.

Now, many, many people who die before retirement age never see the money.  The money is gone.  Single people, parents with children who are older than 19 years old or don’t have a spouse or divorcees — it is gone.  But at least if there was this personal account, they would have something that is inheritable that they could pass on.

GIACHINO:  Leanne, if I am hearing you right that participation is voluntary, then how do you respond to these people out there who say the President’s plan is a slippery slope and that ultimately there will be no Social Security at all?  Isn’t that just untrue?

ABDNOR:  In my opinion and in my experience, it is absolutely untrue — completely untrue.  There is no basis in fact for that.  My friends who are Democrats and some of them are a little worried about it; I try to explain it to them.  To be honest there are some people out there — and a few of them are friends of mine — who really are worried that that is the secret intention of those of us in the reform movement, and that isn’t true.  I am afraid that they have been somewhat victims of some political rhetoric that is intended to frighten them, intended to make them think that that is the case — that elders now would have their benefits changed or that Social Security would go away in the future.  There is no way that is going to happen in this country.  I cannot imagine that happening in this country.  So that is what I would say to people.

The most important thing is that we need to have Congress deal with this now.  We have a very reluctant Congress, frankly, on both sides of the aisle for the most part; although there are members on both sides who do understand that if we don’t deal with it now, it is going to cost us a lot more in the future.  So we need to have everybody say to their elected officials or write them a letter or whatever — and they do still listen to you, tell them to deal with this issue, regardless of what your opinion is of how it should be fixed.

GIACHINO:  What is going on on Capitol Hill?

ABDNOR:  A lot of talk, most of it behind the scenes with those folks who are advocates of Social Security reform. They are meeting quietly with other moderate Republicans and moderate Democrats to see where they could find some common ground to create a plan to move forward.  There is quite a bit of that going on.  Publicly, unfortunately, you see a lot of political rhetoric going back and forth, and I am so sorry that AARP jumped into this and said they are against personal accounts.  I just don’t understand that.  They seem to support other reforms including letting the government invest in the stock market, which I think is a horrible idea.  So there is a lot of that kind of discussion going on publicly, but privately there is some substantive discussions that I am hopeful will yield some results down the road.  We are still very much in this education mode — to educate folks about the facts.

GIACHINO:  Has Federal Reserve Chairman Alan Greenspan taken a formal or informal position on Social Security reform?

ABDNOR:  He did.  He testified in front of both the House and Senate just a week ago very much in favor of going to this investment of some kind.  He is against government investment.  He is in favor of personal accounts for workers, and he is just concerned that the transition costs be kept relatively low and I agree with what he was saying.  He weighed in very strongly, and we were happy to see him talk about it.

GIACHINO:  How do other developed countries handle social security and taking care of their retirees?

ABDNOR:  Well some of them, in fact 20 of them, developed and less-developed, have already moved to some form of private investment and allowing them to have personal accounts — seven countries in South America and Great Britain, New Zealand, Poland, Hungary, Sweden, some you might not have thought would consider it.  And the results have been quite good.  This was started in 1981 by Chile.  Millions of workers around the globe now have a personal account where they watch their money grow.  Some of these countries have had some problems — like Great Britain had some fraud problems with their insurance companies and Chile’s administrative costs were too high, but these are all things that we can address in this country and we as a Commission already addressed in our recommendations to the President.

GIACHINO:  You mention that the program is voluntary for people to set up these personal accounts.  I know that some individuals who are disabled or blind or those who receive supplemental security income under some of these programs, would they be affected by Social Security reform?

ABDNOR:  That depends upon how the plan gets written, but those of us at the Commission recommended and subsequently recommended to the President that if you are disabled now nothing is going to change in your benefits from disabilities.  I firmly believe that we have to leave that alone, separate it from Social Security retirement.  It is a different program.  It is a complicated program, and I think a commission of experts needs to take a look at it.  Are we giving the disabled a sufficient amount of income — too much or too little?  Is it going to the right people?  Someone who knows a lot more about that program than I needs to take a look at that.  But let’s keep that separate until experts can make that recommendation.

GIACHINO:  I know that there is a lot of information and a part of the mission of your organization is to educate the general public, and that is why I thank you for coming on this program.  Have you got a website that people can visit to learn more about Social Security reform?

ABDNOR:  Yes, we do, the website is www.forourgrandchildren.org.  Right now there is more than enough money coming into payroll taxes to pay today’s retirees, and Congress is spending that extra money to pay for other programs.  That ought to go into personal accounts right now because it is Social Security money.

GIACHINO:  Let me stop you there.  Are there trust funds or something set up so the Social Security money that I pay goes into an account so that when I retire I will have access to that money?  What is this other stuff that they are doing with our Social Security money?

ABDNOR:  Alright, I am glad you asked that question.  There is a Social Security Trust Fund, but there is no money in it.  What happens is that Congress spends the excess payroll taxes that have been coming in for over 20 years and will continue for another 13.  Excess Social Security money, they spend it on other government programs, and in its place they put IOUs in the Social Security Trust Fund.  These are held in a file cabinet in West Virginia, to be honest, and when the Social Security system needs money in 2018, they will take some of those IOUs over to the Treasury Department and say “give me money.”  And those are a first claim on income taxes, and the Treasury Department will have to pay them.  But there is no money set aside, so some other government programs are going to have to be cut or taxes are going to have to be raised or benefits will have to be cut.  But that is why we say the problem is now — when you start cashing in those IOUs, not when the IOUs have all run out in 2042, as some people would like you to think that everything is fine until then.  I don’t think so.  I think we have a big claim on income taxes starting in 2018 — that unless we change it, it is going to cost taxpayers a whole lot more starting then.

GIACHINO:  So this is not a “Chicken Little” situation — 2018, to some, may sound quite far in the distance, but it really is not and it certainly will not be if we don’t take care of this situation now.  Then every year that goes by, I assume those debts and those bills get larger and larger and larger and the more things that are going to have to be cut back or out in 2018.  Am I right?

ABDNOR:  You are exactly right.  The Trust Fund is very misleading; it is not like a private trust fund.  Workers then are going to have to be paying not just payroll taxes but also income taxes to the tune of many, many trillions of dollars to pay off those IOUs.  There is no money there.

GIACHINO:  President Franklin Roosevelt, if I am right on this, he was the architect of our Social Security system.  Have we failed him, or do you think the plan was failed to begin with?  Was it over-ambitious?

ABDNOR:  I am not sure that there was a great deal of options on the table at that time in our country to tell you the truth, Renee.  This really might have been the only way to go, and I know that there are some people on my side of the issue who might disagree with that, but we weren’t there and it was a different era for sure.  Since then we have had many opportunities to reform the system, the most recent in 1983 when Congress was faced again with not having enough money to pay benefits, and what they did basically was raise taxes and cut benefits.  The way they cut benefits was by saying that the younger workers in the future would have to wait until age 67 to get their benefits, and they raised taxes on workers way higher than they needed so that there would be this extra money coming in to pay for other government programs and mask the size of the deficit.  And that is what has been happening since 1983.

GIACHINO:  So your organization’s website, www.forourgrandchildren.org, allows people to get online and learn more about your organization and about Social Security.  Again, please tell us what we can do if we want to help with this issue?

ABDNOR:  The most important thing that your listeners can do is contact their members of Congress and tell them what you think.  Tell them that you believe that this is something that needs to be dealt with and not put off.  Unfortunately, some members of the leadership in the Democratic Party keep saying that this is not a problem until 2042 or 2052, and that is totally misleading.  And if your listeners believe that younger workers ought to have the choice to have their own personal account as part of retirement, tell your elected officials that, too.  Ultimately it is in their laps, and ultimately they care about what your listeners think because they want to be re-elected.

GIACHINO:  That is absolutely right.  I know that you have worked very closely with President Bush — you were appointed in 2001 to the President’s Commission to Strengthen Social Security and this is obviously one of his two main goals for his second term, how soon do you think we can see some movement?  Is this something that Congress will move on this term?

ABDNOR:  It really depends upon the public.  Honestly, they have to listen to the American public, and they have been forced to deal with things in the past that they did not want to because the public insisted that they do.  That is why the President is going out weekly to a different state to talk about this and why there a lot of people out there like me doing the same.

We so appreciate the chance to be on talk radio because this is the only way people can hear what we believe is all of the facts and not just part of them, and that is very important.

GIACHINO:  To learn more of the facts, I encourage the listeners to visit your website, www.forourgrandchildren.org.  I think it behooves everyone to get up to speed on Social Security reform.  This is not “Chicken Little.”  This is real.  We need to reform the system now and not wait until 2018.

Thank you very much for your time, Leanne Abdnor.  It has been my extreme pleasure to have you on the program.

ABDNOR:  Mine too, Renee.  Thank you.  Anytime.  Thank you so much.

April 7, 2005
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